The Factom Protocol – A Technical Overview
Factom is a new decentralized protocol working on top of the Bitcoin protocol that solved some of the Bitcoin main Blockchain’s flaws. In this article, we will present a simplistic approach of Factom Protocol White-Paper in an attempt to summarize the main technical features of this new technology.
The Bitcoin Blockchain revolutionized the way we deal with transactions and the way they are recorded; however it still had some flaws that developers have been tirelessly trying to resolve. Now, Factom has introduced a new decentralized protocol capable of expanding the Blockchain potential.
Before the Blockchain, there had never before existed a permanent, decentralized, and trustless record ledger. The potential for this new ledger was huge and many were the applications built on top of this ledger. Unfortunately, they have been running into a few core constraints intrinsic to the Bitcoin original design. Factom solved most of the Blockchain main issues by designing a new protocol from scratch and making it work on top of the Bitcoin Blockchain.
The Utility of the Factom Protocol
Factom is a protocol designed to address the Blockchain major core constraints. Factom designed a protocol for applications capable of providing functions and features far beyond currency transactions. Factom works like an extension of the Bitcoin Blockchain, allowing users to run their own personal, immutable ledgers. Users and applications are allowed to define which information is stored in the ledgers making this technology capable of reaching beyond the realm of digital currency, to more traditional spheres such as business and law.
Factom aims to establish the Factom protocol technology as the true standard of Bitcoin 2.0, and the developers are expecting to see new and innovative ways in which it can be applied.
The Factom protocol is a decentralized way to collect, package, and secure data into the Bitcoin Blockchain; it accomplishes this with a network of Federated servers. These servers delegate responsibility for different aspects of the system. No single server is ever in control of the whole system, and no server is permanently in control of any part of the system; the responsibility for each part of the system cycles among the servers each minute.
Factom uses its own structures to keep the information off the Blockchain. The Factom protocol distributes them over the systems running the Factom nodes, this being a separate P2P network, much like the Bitcoin Network. By placing a single hash in the Blockchain, Factom can store a ton of data. All the entries received over 10 minutes are combined via a Merkle Tree to place a single hash (the Merkle root) into the Blockchain.
Factoids, the currency that drive the Network
Factom constructs a standard, effective, and secure foundation for a lot of Applications to run faster, cheaper, and without bloating Bitcoin. Factoids are implemented in much the same way Bitcoin is, allowing for multi-signature security, multiple inputs, multiple outputs, etc. Factoid transactions are managed on a special Factoid Chain. This Factoid Chain is handled more restrictively than other Chains.
Entries in the Factoid Chain must be valid Factoid transactions, or the Factom Servers will reject the Entries. Factoids are included into the protocol to completely decentralize Factom, and to reduce bloat and spam in both Factom and Bitcoin. Factoids can be converted to Entry Credits in the protocol, and paid out to Factom servers from the protocol. They also help to bind consensus. The conversion of a Factoid to Entry Credits is done via a special purchase transaction on the Factoid Chain.
One of the main ways Factom is trying to approach businesses outside of Bitcoin is to offer them a complete service without them even having to deal with cyptocurrencies. This is because the system is built so that Factoids are converted to Entry Credits assigned to a public key that are non-transferable and can only be used to place entries into Factom. This means that business can buy access to Factom from someone that has Factoids, like the servers that get Factoids for running the system using Bitcoin or even a credit card.
The Factom Protocol developed a network for Applications that has the potential to provide a new set of functions and features which can be implemented in a lot of new ways.
Soon there will be hundreds of new applications using Factom and blockchain technology to solve a wide range of problems in a fast and cheap new way. With the Internet of Things already on its way, the Factom protocol will most certainly play an important role in the development of its future applications.
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